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090
KIA MOTORS 2006 Annual Report
(26) Income Taxes
(a) The Company is subject to a number of income taxes on taxable income at the following normal tax rates:
In December 2003, the Korean government reduced the corporate income tax rate (including resident surtax) beginning in 2005. Specifically, effective January 1,
2005, the income tax rate was reduced from 29.7% to 27.5%. The components of income tax expense for the years ended December 31, 2006 and 2005 are
summarized as follows:
(b) The provision for income taxes calculated using the normal tax rates differs from the actual provision for the years ended December 31, 2006 for the following
reasons:
(c) The effective tax rates, after adjustments for certain differences between amounts reported for financial accounting and income tax purposes, were
approximately 46.3% and 1.2% in 2006 and 2005, respectively.
16.5%
9.7%
Prior to 2005Taxable income Thereafter
14.3%
27.5%
Up to ￦100 million
Over ￦100 million
12,274
21,602
33,876
￦
￦
2006 2005
25,262
(16,761)
8,501
Current
Deferred
Won (millions)
Won (millions)
20,120
286
(78,039)
739
90,770
33,876
Provision for income taxes at normal tax rates
Tax effects of permanent differences, primarily entertainment expenses in excess of tax limit
Investment tax credit
Adjustment of prior year tax return
Decrease in deferred income tax liabilities resulting from quity in income of affiliates (*)
Actual provision for income taxes
￦
￦
(*) Under the Corporate Income Tax Act Article 18 paragraph 2, a certain portion of dividend income is not taxable. Therefore, certain portions of equity in net income of affiliates were considered permanent differences
in the calculation of deferred tax assets (liabilities). Effective January 1, 2005, non-taxable dividend income is excluded from equity in income of affiliates in the calculation of deferred income tax liabilities resulting from
equity in income of affiliates.
December 31, 2006 and 2005
Notes to Non-Consolidated Financial Statements